Here are three ways to handle your student card after graduation.
Keep Using Your Card
After you graduate, you can keep using your student credit card—especially if you like its rewards program, APR, or fee structure. Besides, the card may be very similar to an equivalent non-student card that your credit card issuer offers. This is the case with the Bank of America Cash Rewards credit card, for instance, and the Bank of America Cash Rewards Credit Card for Students. The two cards currently offer the same cash-back rewards rate and the same ongoing APR. If you want to stick with your current card, let the issuer know that you’ve graduated from college. Your lender may simply reclassify it so that it’s no longer considered a student card. Once you earn income from a full-time job, you may also qualify for a credit limit increase. You also can ask the credit card issuer to lower your APR in recognition of your higher income and history of on-time payments. Alternatively, if you aren’t thrilled by your student card’s benefits, but your issuer doesn’t offer anything better, you could hold on to it and use it only occasionally. That would help you maintain a long credit history, which accounts for 15% of your FICO credit score. Lenders value lengthy credit history, because it can demonstrate that you have experience using credit responsibly.
Ask Your Issuer for a Different Card
If your student card doesn’t offer appealing rewards, or if you’re interested in a particular card from the same issuer, ask the company to convert your student card to another one of its products. Some issuers may even offer to upgrade your card without waiting for you to ask. For example, if your student card doesn’t offer a rewards program, your card issuer may be willing to convert it to a cash-back credit card or a travel rewards card. The advantage to this approach is that you’ll still be able to benefit from your student card’s credit history without getting stuck with its drawbacks. On your credit report, the account will likely date back to when you first opened your student card, not when you received your new card, but you’ll enjoy a brand-new set of perks.
Consider Closing Your Account
If you’re ready to move on from your college card and apply for a new piece of plastic, you may be tempted to close your account. However, that’s often not the wisest move. Closing your student credit card account could shorten the average length of your credit history, which could have a negative effect on your credit score, especially if that is the oldest account you have. Credit scoring companies like FICO and VantageScore factor in the amount of time your accounts have been open when calculating your score. In general, the longer your credit history, the more positive the impact on your score—as long as you also regularly make payments on time. Canceling the card could also ding your score by shrinking the total amount of credit you have available. In addition to looking at the ages of your accounts, credit scores factor in how much credit you’re using, compared to your limit. This calculation is known as your “credit utilization ratio,” and it’s worth 30% of your credit score. If you close your card, you’ll have less available credit, and any debt you have will account for a larger share of your credit limit. You may still want to close your student credit card if you’re having trouble juggling multiple accounts or if you don’t want to be tempted into taking on additional debt. You may need to close your student card if a parent co-signed on the account and wants to take their name off of it, but your lender won’t allow you to keep the card in your own name. Even if canceling the card does briefly impact your score, know that you have lots of time to strengthen it. Make on-time bill payments on all of your accounts, and keep other card balances low.
The Bottom Line
Saying good-bye to college life doesn’t necessarily mean parting with your first credit card. Opening a card while you’re a student gives you an important head start on building a long and positive credit history. The best way to take advantage of that history is to hold on to your account, even if you upgrade to a new one long after you leave campus.
